With the end of the 2017/18 tax year rapidly approaching, it is advisable to begin planning now in order to minimise your tax bill as we head into the new financial year. This factsheet considers ways in which both your business and personal finances can be structured so that they are as tax-efficient as possible, and also takes into account tax changes set to come into effect from 2018/19 and beyond.
Make use fo your personal allowance
Each individual is entitled to their own personal allowance (PA), which
is set at £11,500 for 2017/18. You potentially stand to bene t if your partner or spouse has little or no income, as you could opt to spread your own income more evenly to take advantage of each person’s PA. In order to achieve this, you may wish to transfer income or income-producing assets. However, you should be wary of the legislation governing ‘income shifting’: any transfer must be an outright gift, given with ‘no strings attached’.
Additionally, some married couples are able to transfer 10% of their PA to their spouse under the Marriage Allowance. This is available to married couples and civil partners where one earns no more than £11,500 and neither pays tax at the higher or additional rate. In 2017/18, £1,150
can be transferred, reducing a couple’s tax liability by up to £230 in the current tax year.
Children are also entitled to their own PA. Income generated via parental gifts, however, is subject to a limit of £100 (gross) per parent, assuming the child is under the age of 18 and has not married. Beyond this limit, parents of minors are subject to tax on this income.
Review your company car arrangements
Company cars are useful business tools for many business owners. However, they do have their cons, and they may not always be the most tax-efficient option.
It is important to ensure that your business motoring arrangements are organised in the most tax-ef cient way possible. This will depend on your individual circumstances, and many factors will come into play, including the annual mileage, CO2 emissions, the age of the car, the type of fuel it uses and the retention period.
In 2017/18, the car bene t and car fuel bene t (where fuel for private use is provided with the car), on which you pay income tax at up to 45%, is calculated at up to 37% of the list price (car), and the same percentage on a notional £22,600 (fuel). One aspect to
consider is that vans (or similar vehicles not de ned as cars) only attract a fixed level of benefit (£3,230 for 2017/18), with accompanying fuel being a fixed benefit of £610.
To download the complete factsheet, please click on the link below: